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Financial markets crash and the value of cryptocurrencies sinks

2022-01-24T19:39:35.194Z


The Dow Jones Industrial Average falls more than 1,000 points ahead of the Federal Reserve interest rate meeting, and bitcoin loses half its value from just a few months ago.


By Hannah Miao, Yun Li, Bryan Logan and Jessica Bursztynsky -

NBC News

Financial markets fell on Monday in the United States after the worst week for the Standard & Poor's 500 index since March 2020, as investors await economic results from companies and a key policy decision from the Federal Reserve.

The Dow Jones Industrial Average lost 1,070 points, or 3.1%, falling for the seventh consecutive day;

the S&P 500 was down 3.9%;

and the Nasdaq tech market lost 4.7% and entered correction territory.

Investors are keeping an eye on this week's Federal Reserve monetary policy meeting amid the critical situation.Spencer Platt/Getty Images

Monday's declines follow a brutal week on Wall Street in the face of mixed business results and concerns about rising interest rates. 

Monday's pullback sent the S&P 500 down more than 11% this month, and it is poised to post its worst monthly decline since March 2020 and worst ever in January.

The Dow Jones was also headed for its biggest one-month loss since March 2020, falling more than 7% in January.

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The Nasdaq, meanwhile, has fallen 15% in January and is on track for its worst month since October 2008, when it fell 17.7%.

The CBOE Volatility Index (VIX), known on Wall Street as the Market

Fear Gauge

, hit its highest level since November 2020, hitting 38.4 points.

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The fourth quarter earnings season has been mixed.

Although three-quarters of the S&P 500 companies that have reported results have beaten Wall Street estimates, Goldman Sachs and Netflix disappointed investors.

“What had initially been a stimulus-pull downturn morphed last week into earnings jitters,” said Adam Crisafulli, founder of Vital Knowledge.

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 “So investors are now concerned not only about the multiple placed on earnings, but about EPS [earnings per share] forecasts themselves.”

Investors are anticipating a series of high-profile earnings reports from large-cap tech companies this week.

Microsoft fell 5%, Apple lost 3.4% and Tesla fell 7.5% before the quarterly reports.

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Peloton shares rallied more than 4% on news that activist investor Blackwells is calling on the interactive fitness company to fire its CEO, John Foley, and find a buyer.

Riskier assets are selling off this year as investors brace for the Federal Reserve to tighten monetary policy.

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Investors are keeping an eye on the Federal Reserve's monetary policy meeting, which concludes on Wednesday.

Market participants will be watching for any signs of how much the central bank will raise interest rates this year and when.

The federal open market committee, which sets interest rates, is meeting with the expectation that it will not act at this meeting, but will instead

prepare the first of multiple price hikes beginning in March.

In addition, the Fed is expected to conclude its monthly asset purchase program in the same month.

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In his post-meeting press conference, Federal Reserve Chairman Jerome Powell could also indicate when the central bank will begin to shrink its gargantuan balance sheet.

Goldman Sachs said over the weekend that it sees growing risks that the Fed could enact even more than the four quarter-percentage-point hikes the market has priced in this year.

The company also said the Fed could start drawing down nearly $9 trillion in assets it has in July.

Bond yields have soared in the new year in anticipation of Federal Reserve rate hikes, prompting in part the dramatic sell-off in growth-oriented tech stocks.

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While the 10-year Treasury yield ended last week down around 1.76%, the benchmark rate is up around a quarter of a percentage point in 2022.

“The big story so far in 2022 has been the rapid upward movement in interest rates, which is prompting investors to reassess valuations in some of the most expensive segments of the market and rotate into value stocks,” he said. David Lefkowitz, head of equities at UBS Global Wealth Management

Cryptocurrencies continue to fall

Cryptocurrencies continued their dramatic decline over the weekend, with bitcoin losing nearly half its value since hitting its November high.

Bitcoin, the world's most valuable cryptocurrency by market value,

plunged nearly 8% on Saturday to trade just above $35,000.

The coin hit a record high of $69,000 in November.

On Monday morning, Bitcoin was trading around $33,500.

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For its part, the ether, the second cryptocurrency by market capitalization, sank almost 10% to trade around 2,400 dollars.

The losses followed Thursday's drop in the stock market.

Cryptocurrencies and traditional stocks have fallen in tandem this month, with investors concerned about how the anticipated Federal Reserve interest rate hike will affect the market.

One of the most common investment arguments for bitcoin is that it hedges against rising inflation as a result of government stimulus, but analysts say the risk is that a more aggressive Fed may take the wind out of the sails. of the cryptocurrency market.

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There are also concerns that US regulators will take further action against digital currencies.

Russia's central bank proposed to ban the use and mining of cryptocurrencies earlier this week.

The authorities argued that it posed a threat to financial stability, the well-being of citizens and the sovereignty of its monetary policy

.

US authorities have also clamped down on certain aspects of the market.

Source: telemundo

All news articles on 2022-01-24

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